Tech stocks soar to new highs after glowing earnings reports
(Bloomberg) -- Shares in Amazon.com Inc., Microsoft Corp. and Alphabet Inc., hit records Friday after the technology giants reported earnings that showed strong revenue and profit growth for another quarter as the internet pulls in more shoppers, advertisers and businesses.
All three companies beat analysts’ estimates in the September quarter. Consumers and corporations are moving more of their day-to-day functions and business online, from groceries to workplace software, data storage and applications hosting. That means increased sales for Amazon’s online marketplace, more eyeballs on ads dished out in Google’s mobile search results, and busier servers in all three companies’ data centers.
Even technology companies on the periphery of this internet boom managed to catch some of the wave. Intel Corp.’s server-chip business has struggled as big companies use their own data centers less and move operations to the cloud. However, the semiconductor company is now selling more to the big internet companies that lead in those services.
There are risks: regulators around the world are considering how to control internet companies’ influence, and in the U.S., Google and Facebook Inc. are facing criticism after their advertising services were misused by Russia-linked groups to influence last year’s presidential election. But these issues have yet to slow the rise of internet use. Here’s what we learned from the four biggest tech reports Thursday.
Amazon reported sales and profit that blew past analysts’ estimates, showing the pace of its growth continues even as it expands into new businesses and rolls out new hardware products.
- Subscription services revenue, mostly Amazon Prime memberships, jumped 59 percent to $2.4 billion, fueled by the company’s annual Prime Day sales event.
- Revenue from Amazon Web Services, the company’s profitable cloud-computing business, increased 42 percent. The unit generated $1.12 billion in operating income, far and away the most of any Amazon segment.
- Whole Foods brought in $21 million in operating profit in the one month of the quarter that included the acquisition. For the first time, Amazon reported sales of $1.28 billion from "physical stores,” most of which are Whole Foods groceries.
- The stock gained 13 percent to a record $1,100.95, the biggest single-day jump in more than two years.
The internet behemoth reported a 23 percent jump in revenue to $19.7 billion from Google online properties, such as its search engine and video-streaming site YouTube. That continued a run of year-over-year sales gains of at least 20 percent that has confounded doubters who worried the company’s size would slow its growth.
- Google’s "other revenue" category expanded by 40 percent. The company said the largest contributor to that line item during the quarter was its cloud unit.
- YouTube racked up more than 100 million viewing hours per day in living rooms, a 70 percent increase in the past year, Google Chief Executive Officer Sundar Pichai said during a call with analysts on Thursday.
- Shares climbed 4.3 percent Friday to $1,033.67, the biggest gain since January 2016 and a record.
The software maker’s cloud transformation, spearheaded by CEO Satya Nadella, stayed on track amid buoyant demand for Azure cloud services, used to store and run customers’ applications in Microsoft’s data centers. Azure is No. 2 in this part of the cloud business behind Amazon Web Services, and the market is growing fast enough to lift both companies’ revenue.
- Azure revenue gained 90 percent in the fiscal first quarter. Margins in the cloud business are widening as more data centers come online, with more Azure customers opting for profitable premium services such as AI and data-analytics software, according to CFO Amy Hood.
- Sales of the company’s Surface hardware products jumped 12 percent, driven by a new laptop design that went on sale June 15. Even as the overall PC market contracted, Microsoft’s More Personal Computing division posted better-than-projected revenue of $9.4 billion.
- Microsoft shares jumped 6.4 percent to $83.81, the biggest jump in two years. The shares have gained 35 percent this year to the highest level in the company’s 31 years as a public company.
The computer-chipmaker posted robust third-quarter growth in newer businesses – memory and the so-called internet of things -- yet sales in its PC processor division were flat and data-center unit revenue is being held back by declining corporate spending on servers. Intel stock gained 7.4 percent to $44.40, the biggest single-day jump since July 2014, and the highest value in 17 years.
- Still, within the server division, sales to cloud-services providers like Google, Microsoft and Amazon jumped 24 percent, leading to a 7 percent sales gain in the whole unit.
- Though its biggest division, PC chips, posted no growth, that was still better than the overall PC industry, which contracted 3.6 percent in the period, according to Gartner. Intel CFO Bob Swan said that’s because average selling prices are rising on consumer demand for high-performance chips.
- The company gave an upbeat forecast for the final three months of the year, pegging revenue at about $16.3 billion, which would be ahead of analysts’ projections.
--With assistance from Jing Cao, Mark Bergen, Spencer Soper and Ian King